No matter how much happens in canna-land it can seem like nothing ever changes. Federal illegality remains in place. Most businesses still lack access to the banking system.
Even so, the industry’s progress is unmistakable. This year saw a new set of states markets begin to flourish, as an even bigger cohort makes preparations to open in the northeast. It’s never clean or easy, but all the arrows still point in the same direction: eventual federal reform.
With that in mind, here are the biggest stories of 2021, and the ones that will continue to matter next year.
10. Big Pharma arrives
The two biggest deals of the year confirmed what many in cannabis circles have believed for years: Big Pharma has its eye on cannabis.
- Ireland-based Jazz Pharmaceuticals acquired U.K.-based GW Pharmaceuticals for $7.2B. GW developed Epidiolex, the CBD pharmaceutical approved by the FDA to treat at least two devastating pediatric seizure disorders. The acquired company had several more cannabinoid drugs in its pipeline as well.
- This month Pfizer said it would acquire Arena Pharmaceuticals, which has a cannabinoid drug development program, for $6.7B.
These deals likely only represent the beginning of Big Pharma’s interest in cannabis.
9. Delta-8 THC confuses everything
Delta-8 THC is a cannabinoid said to offer a high that’s similar to THC, but milder. It’s typically produced by mixing CBD with a chemical catalyst.
- Delta-8 wasn’t of commercial interest until late 2018 when the federal Farm Bill legalized hemp. Then some manufacturers decided they could sell Delta-8 gummies and vapes in states which haven’t legalized.
- Delta-8 products became tremendously popular. Some states resolved the legal gray area by explicitly banning it and similar chemicals.
The Delta-8 controversy matters, because there are likely to be more similar situations as researchers learn more ways to manipulate the plant and its derivatives. As Kim Stuck, a former Denver regulator who’s now CEO of compliance consultancy Allay, put it, “They didn’t just legalize a plant, they legalized endless possibilities.”
- Related: Lesser known plant-made cannabinoids, such as CBN, began to turn up in popular products.
8. Cross-border deals get creative
While federal U.S. legalization remains elusive, more Canadian companies are exploring new ways to reach American consumers.
- Notably in October Canopy Growth agreed to pay almost $300M upfront to acquire leading edibles brand Wana Brands once it can legally do so.
- Related: The new center-left government in Germany, Europe’s largest economy, is poised to legalize.
7. Cannatech heats up
Enterprise and consumer-facing cannabis software start-ups raised more than $1.6B in 2021. Investors see cannatech as having tremendous growth potential while sidestepping many of the most onerous aspects of companies that touch the plant.
- Leading the pack, e-commerce platform Dutchie closed a $350M Series C funding in October valuing the company at $3.75B. It came only seven months after the company raised $200M.
6. Equity lags
Despite a great deal of talk, efforts to support minority executives and entrepreneurs are not going well. A report from MJBiz, found the number of executive cannabiz positions held by women and minorities is lower than two years ago as more white professionals flood into the industry.
- Two of the countries highest profile equity programs, in Illinois and Los Angeles, struggled to deliver for many hopeful candidates.
5. Silicon Valley cracks open the door
Google and Facebook continue to prohibit cannabis ads and shadowban related accounts. But other tech giants have been more obliging.
- Amazon threw its support behind legalization and said it would stop testing most employees for THC. For the moment, at least, Amazon’s interest seems to be less about selling cannabis than having access to a sufficiently large workforce.
- Apple opened its app store to shoppable delivery apps in legal markets. The grateful apps wasted no time going live.
4. MSOs begin to scale
- While it’s still a stretch to call any company a national brand, Trulieve, Curaleaf and their largest competitors now have national presences. Expect them to keep expanding their footprints through acquisitions. For the time being they prefer operational assets to brands, but that may be changing.
- The biggest companies are also accessing debt financing on more attractive terms than ever before.
3. Growth proves uneven
When the data comes out total 2021 legal sales are likely to show significant gains over the roughly $18B market in 2020. But not everywhere will see the same jump. And some states have seen slowing growth and even declines.
- Much of this reflects how the pandemic played havoc with buying patterns.
- Vince Ning, CEO of California distributor Nabis told The Broccoli Report that California’s $4.4B market shrunk in the fourth quarter. “A large part of that is the commodification—the oversupply and saturation we all expected,” he said. “So while we’re all shipping the same amount of units and selling through the same amount of products, prices have dipped, and so have sales.” Ultimately, he said, the cycle is making legal REC more affordable.
- The combination of crime, taxes wildfires and regulations hit many California businesses hard and have them calling for redress.
- Related: Despite the industry’s many advances, pot stocks had an abysmal year. Investors’ pessimism reflects, in large part, that federal legalization still looks to be years off. It doesn’t help that many institutional investors are still keeping their distance.
2. A shifting calculus in Washington D.C.
After Democrats gained control of the Senate in the Georgia run-off elections, many in the industry predicted swift action on reform. It hasn’t worked out that way. Over the Summer, Senate Majority Leader Chuck Schumer (D-N.Y.) released a bill to legalize federally.
- But despite broad support in the Democratic caucus, it struggled to gain traction.
- Meanwhile President Biden hasn’t delivered on his promise to use his clemency powers to free non-violent cannabis offenders.
Several months later Rep. Nancy Mace (R-S.C.) released a competing bill with lower taxes and fewer equity provisiosn.
- As the industry grows increasingly frustrated with taxes and its lack of bank access, look for Republicans to try and co-opt what has traditionally been a Democratic issue.
1. The northeast is ready to pop
New York and New Jersey have begun preparations to open two of the country’s largest REC markets. While the exact timing remains unclear, and there are sure to be many stumbles, the new markets’ combined population of nearly 30M, centered on the media capital of the world, is all but certain to shift the industry’s center of gravity and raise its visibility.
- Connecticut, population 3.5M, has also legalized REC and Pennsylvania (12.8M) may not be far behind.
- As regulators in these states get their bearings look for interstate trade to become more central to the cannabiz conversation.